Washington State Real Estate Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The term "earnest money" refers specifically to a deposit made by a buyer to demonstrate their serious intent to purchase a property. This money is typically provided along with a purchase offer and acts as a form of good faith; it shows the seller that the buyer is committed to proceeding with the transaction. In the event that the deal goes through, the earnest money is usually applied toward the down payment or closing costs. However, if the buyer defaults on the contract without a legally justified reason, the seller may have the right to retain the earnest money as compensation for the loss of a potential sale.

In the context of real estate transactions, earnest money plays a critical role in establishing trust between the buyer and the seller. It can also serve to differentiate a serious buyer from those who may not be as committed, which is particularly important in competitive markets where multiple offers on the same property are common. The other options do not accurately reflect the purpose or nature of earnest money, as they pertain to different aspects of the real estate process, such as listing fees, advertising costs, or broker commissions, none of which relate to the buyer's commitment to a purchase.